As the U.S. Treasury Department weighs sanctions against the cryptocurrency Tether for its alleged role in illicit financial activities, questions have emerged about a potential conflict of interest involving Howard Lutnick, co-chair of President-elect Donald Trump’s transition team and a prominent Tether advocate.
According to insiders familiar with the matter, Treasury officials have spent months considering sanctions against Tether over suspicions it has facilitated transactions linked to Mexican drug cartels and other criminal enterprises. Furthermore, the cryptocurrency has been flagged by private-sector analyses cited by Treasury for allegedly enabling funds transfers for terrorist groups. This ongoing probe comes at a delicate moment, as Lutnick, also CEO of Cantor Fitzgerald, has publicly endorsed Tether in media appearances and has disclosed managing assets related to the cryptocurrency.
“The discussions of sanctions against Tether are unrelated to [Lutnick’s] political activities,” a source stated, adding that the probe began before Lutnick’s involvement in Trump’s campaign. Lutnick remains a candidate for treasury secretary, a role that would give him significant oversight of Treasury’s sanctions decisions, sparking debate about the appropriateness of his potential appointment.
Sanctions could restrict U.S. entities from transacting with Tether due to its alleged facilitation of drug trafficking and terror financing. Deputy Treasury Secretary Wally Adeyemo recently told lawmakers that Russia has increasingly turned to Tether and other stablecoins to bypass sanctions and fund military actions, placing Tether directly in Treasury’s crosshairs. An advisory from the Financial Crimes Enforcement Network in June highlighted the use of Tether and other virtual currencies in purchases of equipment from Chinese suppliers by criminal networks.
Tether officials have repeatedly denied these accusations. Paolo Ardoino, Tether’s CEO, recently stated on social media platform X, “There was no indication that Tether is under investigation,” rebuffing prior reports of possible sanctions. Tether also stated that it has “no knowledge of any such investigations,” despite ongoing communications with law enforcement.
Lutnick’s support for Tether has raised ethical considerations among Trump transition officials. If appointed to Treasury, he would likely need to divest significant holdings in line with standard Office of Government Ethics practices. The Trump transition’s code of conduct mandates members to recuse themselves from any matters presenting direct financial conflicts, although Trump’s previous administration drew criticism for overlooking traditional ethical standards.
Alongside Lutnick, financiers Scott Bessent and John Paulson are also under consideration for treasury secretary. Bessent is a known crypto supporter, while Paulson has substantial investments in Fannie Mae and Freddie Mac, two mortgage giants under Treasury’s oversight.
Lutnick’s defense comes from allies who argue his firm’s support for Tether could align with Treasury’s regulatory goals. Avik Roy, founder of the Foundation for Research on Equal Opportunity, noted, “Lutnick’s firm has been helping Tether rely more heavily on conventional financial assets — exactly what Tether should be doing, from a regulatory perspective.” Roy added that Tether’s affiliation with an established financial entity like Cantor Fitzgerald might even mitigate risks.
Historically, Treasury appointees with significant wealth and ties to Wall Street have often faced scrutiny. Former Treasury Secretary Steven Mnuchin, for example, encountered criticism over his film company sale after assuming office, while Henry Paulson, President George W. Bush’s appointee, drew accusations of favoring his former employer, Goldman Sachs. Both men denied allegations of impropriety.
Despite assurances from supporters, some financial experts remain wary of crypto-related conflicts in the highest levels of Treasury. “It is incredibly important that the people in charge of the Treasury Department and bank regulators be free from conflicts of interest in crypto,” emphasized Aaron Klein, senior fellow in economic studies at the Brookings Institution.
With the Treasury probe ongoing and Lutnick’s potential appointment still under consideration, questions of ethics and oversight loom large as the Trump transition moves forward. Transition spokeswoman Karoline Leavitt has confirmed that Trump will announce decisions on his new administration’s appointments in due time.
